Related papers: The Screening Cost of Liquidity
In many search markets, advance interim contracts include an explicit right to renege, granting one party the option to switch to more attractive matches that emerge later in the search process. This paper studies the design and welfare…
This paper proposes a theory of pricing premised upon the assumptions that customers dislike unfair prices---those marked up steeply over cost---and that firms take these concerns into account when setting prices. Since they do not observe…
In credit markets, screening algorithms aim to discriminate between good-type and bad-type borrowers. However, when doing so, they can also discriminate between individuals sharing a protected attribute (e.g. gender, age, racial origin) and…
Interconnection networks of parallel systems are used for servicing traf- fic generated by different applications, often belonging to different users. When multiple traffic flows contend for channel bandwidth, the scheduling algorithm…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
How does one allocate a collection of resources to a set of strategic agents in a fair and efficient manner without using money? For in many scenarios it is not feasible to use money to compensate agents for otherwise unsatisfactory…
We consider sequential search by an agent who cannot observe the quality of goods but can acquire information by buying signals from a profit-maximizing principal with limited commitment power. The principal can charge higher prices for…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
A repurchase agreement lets investors borrow cash to buy securities. Financier only lends to securities' market value after a haircut and charges interest. Repo pricing is characterized with its puzzling dual pricing measures: repo haircut…
This paper investigates the benefits of incorporating diversification effects into the pricing process of insurance policies from two different business lines. The paper shows that, for the same risk reduction, insurers pricing policies…
Second-price auctions with deposits are frequently used in blockchain environments. An auction takes place on-chain: bidders deposit an amount that fully covers their bid (but possibly exceeds it) in a smart contract. The deposit is used as…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
In many power system optimization problems, we observe that only a small fraction of the line flow constraints ever become active at the optimal solution, despite variations in the load profile and generation costs. This observation has…
We investigate a spectrum oligopoly market where primaries lease their channels to secondaries in lieu of financial remuneration. Transmission quality of a channel evolves randomly. Each primary has to select the price it would quote…
Sparsity or complexity? In modern high-dimensional asset pricing, these are often viewed as competing principles: richer feature spaces appear to favor complexity, while economic intuition has long favored parsimony. We show that this…
In lending, where prices are specific to both customers and products, having a well-functioning personalized pricing policy in place is essential to effective business making. Typically, such a policy must be derived from observational…
One of the crucial problems in mathematical finance is to mitigate the risk of a financial position by setting up hedging positions of eligible financial securities. This leads to focusing on set-valued maps associating to any financial…
An emerging blockchain protocol design pattern leverages the asymmetry between the computational effort in performing versus verifying tasks. For example, cryptographic validity proofs (e.g., SNARKS) require the prover to expend significant…
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…
According to common understanding, in free completion of a private product, market and price, the two main factors in the competition that leads to economic efficiency, always exist together. This paper, however, points out the phenomenon…